I知 trying to find the sweet spot with MAGI/Roth conversions, taxes, ACA subsidies, and quality health care. Our annual spend is 25-30K. I知 leaving my job next month, my husband works part-time (10K annually) and we make 3K on a rental. We have a few years of cash squirreled away before I have to access my 457.
We are 53 and mostly healthy, have had our annual physicals, colonoscopies, mammogram, all recommended vaccines, etc.
My current thinking for this year is to Roth convert up to $39,500, putting at least $4,000 of earned income into an IRA to maximize the savers credit. At that income an expanded bronze Oscar HDHP would have a $0 premium and still allow us to put $4200 into an HSA.
You're looking at a $39,500 threshold for the saver's credit, I presume. Why contribute only $4,200 to the HSA? If you have family HDHP coverage you're allowed to contribute $7,200. Be aware that the HSA contribution will lower your AGI. Max out your HSA and you'd be able to Roth convert up to $46,700 AGI pre-HSA and then put $7,200 in your HSA to bring your AGI back down to the $39,500 level.
Also be aware that once you start withdrawing anything from your retirement accounts the saver's credit will be much harder to qualify for. If you've withdrawn more in the past few years than you've contributed just this year, no saver's credit for you. Therefore the saver's credit may be available for the next few years if you plan to withdraw only from your cash cushion until it runs out.
This seems like an unusual strategy though; many people who keep that much in cash like to basically keep it untouched as a backup plan in case of a market downturn, not as the first priority to draw down even in a bull market.
Finally, be aware that the saver's credit is non-refundable. Many people are excited at the prospect of saving $2,000 from this, but that's only if you have $2,000 of taxes to offset. In your situation if you have $39,500 AGI, none of it capital gains/qualified dividends, and claim the standard deduction, you'll only have $1,440 of tax before the saver's credit. If you itemize deductions and/or have capital gains income, the benefit from the saver's credit will be less than this.
OR I could Roth convert to $34,480 and pay $50 monthly for a Blue Cross silver plan with CSR, no deductible and much lower out of pocket.
Yes, this is another option. Stay under 200% of the poverty level and your health expense worst-case scenario goes down.
So I知 trying to figure the total annual cost of going with the better silver plan. $600 for the premiums, $500 in taxes I値l have to pay later for the lower Roth conversion, and $720 in taxes for not maxing the HSA.
I think a big variable in this equation is your health. Go with the CSR silver plan and you reduce your worst-case expenses quite a bit, but the trade-off is your best-case expenses are slightly higher. That could be the right trade-off or the wrong trade-off, and it all depends on how much you spend on medical care. A couple of trips to an urgent care clinic could erase much of the tax advantage from your bronze plan strategy, and one trip to the hospital would make the silver plan the obvious winner. What's your most likely total of your doctor bills for the year? That's a question you're better equipped to answer than I.
